EU wheat futures down; cold weather causes concern

European wheat futures inched lower on Thursday, pressured by weakness in Chicago prices but with losses limited by uncertainty over the impact of cold weather in Europe this month. March milling wheat, the benchmark contract on the Paris-based Euronext exchange, settled 0.25 euro or 0.2 percent lower at 169.50 euros a tonne.
The contract was continuing to consolidate below a one-week high of 171 euros touched on Tuesday with a second successive daily fall in Chicago weighing on Euronext. CME Group's March EU wheat contract eased 0.75 euro to 174 euros a tonne.
Strategie Grains analysts on Thursday reduced by 1.2 million tonnes to 143.8 million their monthly forecast for this year's European Union soft wheat harvest, citing expected frost damage in the east of the bloc, although this would be 6 percent above last year's production. Traders have generally pointed to limited risks, notably in top EU wheat producer France, but weather outlooks calling for freezing conditions to persist into next week have raised some uncertainty.
In Germany, the EU's second-largest wheat grower, there was some concern after Wednesday night saw more intense cold. "Germany had another night of double-digit frosts on Wednesday night with temperatures falling to minus 20 degrees Celsius in parts of south Germany," one German trader said. "There is a lot of snow cover but frosts of this magnitude are starting to cause some concern in the market about possible impact on crops."
German cash market premiums in Hamburg were firm, with support from demand for prompt delivery and the crop worries. Standard wheat with 12 percent protein content for January delivery in Hamburg was offered for sale at 4.0 euros over the Paris March contract against 3.5 euros on Wednesday. Buyers were seeking 3.5 euros over.
In exports, EU data showed that soft wheat exports from the bloc had reached 13.6 million tonnes by January 17, down 3 percent from a year ago, including 174,000 tonnes in the past week. In its monthly crop report, Strategie Grains forecast that EU soft wheat exports would rise next season to 26.5 million tonnes, supported by the larger expected harvest, from a projected 23 million tonnes in 2016/17.